Monday, October 22, 2012

After Google
Inc(NASDAQ:GOOG) could not live up to the earnings expectations of Wall Street,
at least 7 brokerages have cut their ratings on shares of Google. However,
analysts say that growing mobile advertising revenue indicate better times in
future.

The earnings report was
released hours ahead of schedule due to a glitch. The report exposed slowing
sales in Google’s core Internet advertising area.

The quarterly earnings
have missed the expectations for yet another time in a year. Analysts, however,
feel that the decline was a short-term trade-off since mobile advertising
revenue accounts for a bigger part of its business.

Larry Page, Google’s
Chief Executive, said that mobile business of Google that includes app sales
and advertising was now generating revenue at a yearly run rate of $8 billion,
up from $2.5 billion previous year.

The run rate indicates
how Google has placed itself to win regardless of platform, as written by Brian
Nowak, an analyst from Nomura Equity Research. He has, however, cut his price
target on the stock from $900 to $840 owing to the short-term outlook.

Google stocks closed
down 8% at $694.37 on the earnings day. Shares of GOOG are down about 9.50%
ever since it reported earnings.

Raymond James,
Susquehanna Financial Group, Evercore Partners, Piper Jaffray, Robert Baird and
RBC Capital Markets have also lowered their outlook on the Google stock by an
average of $44.14.

Analysts of Barclays
Capital, on the other hand, have raised their price target by 4% to $780.

Anthony DiClemente, an
analyst at Barclays said that he believes dislocation in shares generates a
buying opportunity. He thinks Google can benefit from ecommerce tailwinds and
moderation in cost per click.

For the fourth
consecutive quarter, Google has reports a decline in average CPC, which happens
to be a crucial metric measuring the price advertisers pay the company.